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Don't Use Credit Cards Before Filing for Chapter 7 Bankruptcy

Most debtors who seek relief under Chapter 7 of the Bankruptcy Code have credit card debt. In most instances, Chapter 7 allows these debtors to discharge their debt. Under certain circumstances, however, recently incurred debt, including credit card debt, can be deemed to be non-dischargeable.

Under 11 U.S.C. § 523(C), a debt may not be discharged in Bankruptcy when the debt constitutes:

(I) consumer debt owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and

(II) cash advances aggregating more than $875 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable.

In effect, these provisions seek to prevent a debtor from racking-up debt just before filing for Bankruptcy, when the debtor has no intention of paying the debt. If the debt is incurred within 90 days of filing for Bankruptcy, the law presumes that the debtor intended to defraud the creditor. As such, if the Bankruptcy Trustee or Creditor decides to challenge the dischargeability of such a debt, the debtor will be forced to prove that he or she did not intend to defraud the creditor. You want to avoid this situation.

If you are thinking about filing for Bankruptcy, stop using those credit cards.